How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? What are s

Name Professor Class Date Economic Value Added (EVA) 1. How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? To determine how Economic Value Added (EVA) statements can be used to improve financial statement reporting, results, and success it would be necessary to determine what Economic Value Added is, its purpose and why companies are using it…

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Introduction

By deducting the cost of capital and capital itself from the profit made by a business enterprise, the shareholders are able to know the value created by the capital (and includes debts) they put in the company. It is a given that all business operates under the principle of profit motive, which intends to generate revenue. The practice of Economic Value Added (EVA) however helps the financial reporting of a company’s performance to its investors and shareholders by reporting the rate of return of the investor’s risk taking in the company which enables the investors and shareholders to compare the performance of their investment in the firm vis-a-vis putting it in other investment instruments. Through Economic Value Added (EVA) statements, they are able to determine that their money is creating more value in the company than other mode of investments. On the end of the firm, Economic Value Added (EVA) statements as a financial management system enable its managers to determine how much the company’s capital is used and how much value it creates using the current strategy of the company. ...

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